Bitcoin glossary: Every blockchain and cryptocurrency phrase you need to know – CNET
Against all odds, blockchain technology has gone mainstream. Bitcoin has become a household word, and financial institutions around the world invest in cryptocurrencies or allow their customers to do so. Meanwhile, NFTs have attracted the patronage of celebrities like Eminem, Jimmy Fallon and Stephen Curry.
But despite all the publicity, blockchain technology is still extremely arcane. It’s truly understood only by talented engineers — many of whom were early adopters of cryptocurrencies like bitcoin and ether — and can be overwhelming for the layperson.
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Below is an alphabetical glossary of blockchain terms you might find useful. Note: It’s far from an exhaustive list of terms and phrases, but covers the basics.
An airdrop is when a company drops cryptocurrency or an NFT directly into your wallet. Instead of an initial public offering, blockchain services will launch a token and airdrop users who have used that service in the past. This can be done for several reasons: It can be pure marketing, as airdrops raise awareness of a token which people can then invest in, or it can be to provide governance tokens for a DAO.
A recent example: The Ethereum Name Service allows users to change their wallet number to a wallet name (like CNET.eth). In December, it launched its own ENS token, airdropping an amount to everyone who had used the service. The more people had used Ethereum Name Service, the more tokens they were airdropped — in some cases were worth tens of thousands of dollars.
To “ape” into something is to recklessly invest in the hopes of short term profit. Everyone knows scams are abound, and careful investors do research to vet a cryptocurrency or NFT project to ensure it’s safe. To “ape” into a project is to see its value rising and to throw money into it hoping for the best.
Any cryptocurrency that’s not bitcoin or ether. Many are also known as “shitcoins.”
Your bags are investments you hold over a long period of time, often ones that have performed poorly. “Hopefully the bullrun pumps my bags.”
The world’s biggest cryptocurrency exchange, where people buy and trade cryptocurrencies. It’s under investigation by the US Department of Justice and the IRS for tax evasion and money laundering.
A blockchain is a “distributed database.” In simpler terms, it’s a decentralized ledger that records information in digital “blocks.” Once a block is mined and added to the chain, it can’t be altered, thus blockchains offer public records of unchangeable data.
There are many different blockchains which feature varying degrees of decentralization, efficiency and security. Many have their own cryptocurrency — for instance, ether is a cryptocurrency built on the Ethereum blockchain.
Bitcoin is the first cryptocurrency, built on the Bitcoin blockchain. It was created in 2009 by a person or group of people under the pseudonym of Satoshi Nakamoto. Only 21 million can ever be minted, around 18.9 million of which are already in circulation.
Cryptocurrencies are “burned” by being sent to a wallet that can only receive them and not send them. Burn mechanics are often utilized to cause a deflationary impact: the fewer tokens in circulation, the more scarce the ones investors hold become.
Buy the dip
This refers to buying more of an asset after its price as fallen. For instance, a bitcoin holder might “buy the dip” if the price falls by $10,000.
Cryptocurrency graphs that chart price movement feature green and red bars — green for price going up, red for price going down — which are sometimes referred to as “candlesticks”.
A cryptocurrency wallet not connected to the internet. These are safer and less prone to scams.
The ability to send data, tokens or assets from one blockchain to another. This is different from “multi-chain” services, which are built to work on multiple blockchains.
A form of information encryption, where data can only be unencrypted with a key. Blockchains using Proof of Work protocols rely on the solving of incredibly complex cryptography puzzles for new blocks to be mined and verified.
A cryptocurrency is a token that’s native to a blockchain. Cryptocurrencies are typically minted with each new block mined. For instance, each new block of Ethereum mined comes with a reward of two ether tokens as compensation to the miner.
Cryptocurrencies are a type of token. Their nativity is their defining factor: Other tokens are created using platforms and apps built on top of blockchains, while cryptocurrencies built into a blockchain’s protocol.
Short for decentralized apps.
A decentralized autonomous organization. A DAO is an organization where decisions are made by consensus: All holders of governance tokens get votes in organization decisions, with the solution with most votes being the DAO’s course of action. Imagine a decentralized investment bank, but instead of fund managers making investment decisions the holders of its governance tokens vote on how funds from its treasury are invested.
Decentralized exchanges are used to buy and trade cryptocurrencies. Unlike typical exchanges, these use peer-to-peer transcations that circumvent any centralized authority. These include Uniswap and Sushiswap.
Short for “degenerate,” similar to “apeing.” A “degen play” or “being a degen” means investing in something without doing due diligence.
Short for “decentralized finance.” DeFi is any financial tool, like a smart contract or DAO, that uses blockchain technology to circumvent middleman institutions.
Diamond hands are people who hold onto financial assets for long periods of time or throughout turbulent price movements.
Short for “Do Your Own Research.”
The cryptocurrency mined on the Ethereum blockchain. Ether is second only to bitcoin in marketcap, but is a far more used cryptocurrency. Most altcoins are also built off Ethereum, and hence are tethered to ether. Most NFTs are also built on Ethereum, which is why ether is the dominant tokens used in NFT trading.
A blockchain that competes with Bitcoin. It’s designed to take the blockchain technology pioneered by Bitcoin’s developers and utilize it for more sophisticated financial tools, like smart contracts.
Flash loans are a DeFi tool that allow for loans without collateral. Flash loans allow you to borrow money to buy an asset, but only if the asset can be bought and the interest paid back within the same block. Imagine buying a $1 million house using a loan, but the loan only being approved if you already lined up another buyer willing to pay enough for you to pay back the loan plus interest.
These loans use smart contract technology.
Short for “fear, uncertainty and doubt.” This can be legitimate, like people airing concerns about a token or NFT project’s security or legitimacy, or tactical, as in an organized move that encourages people to sell, lowering the price of the asset.
Gas is the price you’ll pay for using the Ethereum network. Every transaction requires a gas fee, which can vary depending on how overloaded the blockchain is. Prices typically range between $50 to $500 per transaction, but can skyrocket during times of heavy network load.
Governance tokens are cryptocurrencies that give the owner voting rights over the given project. See also: DAO.
The cost of gas is expressed by GWEI. As a rough guide, gas will be cheap when gwei is below 50 and expensive when it’s above 100.
A purposeful mispelling of “hold,” used to encourage people to hold onto their tokens during a downward price movement.
Layer 1 and Layer 2
If you dabble in cryptocurrencies you’ll hear about Layer 1 and Layer 2 solutions. Layer 1 is the blockchain architecture itself, whereas Layer 2 refers to architecture built ontop of the blockchain.
For instance, take the issue of Ethereum’s high gas costs. A “ayer 1 solution would be to make the Ethereum blockchain more efficient, such as by adopting Proof-of-Stake protocols. An example of a layer 2 solution is Immutible X, an exchange built on top of Ethereum that uses smart contract technology to allow for gas-free, carbon-neutral trading.
A liquid market is one with a large number of buyers and sellers, which allows buy or sell orders to be completed almost immediately. Cryptocurrency markets are liquid, whereas NFT markets are not. Most legitimate cryptocurrencies can be bought or sold at any time, where as NFT traders need to list an item for sale in the hopes that a buyer will manually purchase it.
A blockchain protocol launching for public use will be put in the mainnet. This distinguishes it from a testnet, which is more like a beta launch of a blockchain protocol.
Many cryptocurrencies aim to provide a utility or serve a purpose. Memecoins offer no prospect of utility, and purely exist as speculative assets. Dogecoin is the most known
, but there are many, many more.
An online, browser-based digital wallet used primarily for transactions on the Ethereum blockchain.
Mining is the process by which transactions are verified, and blocks are added to a blockchain. This typically involves powerful computers solving complex cryptography problems. Crucially, this is also how new cryptocurrency is added into circulation. In the case of bitcoin, roughly six bitcoins are minted each time a new block is mined.
A powerful computer set up for the specific purpose of mining cryptocurrencies.
A warehouse (or room) of mining rigs that operate throughout the day, mining cryptocurrencies.
On blockchains, minting means verifying information and lodging it as a block on the chain.
“Minting” an NFT means buying it from its creator during a public sale. “Mint price” refers to what its creators sell it for — for instance the Bored Ape Yacht Club “mint price” was 0.08 ether. After all NFTs in a collection are minted, traders who want exposure to that collection need to buy them off a secondary market like OpenSea.
An app or services designed to be used on multiple blockchains. This is different from cross-chain apps and services, which are developed to send data or assets from one blockchain to another.
A dramatic spike in price is referred to as “mooning” or “a moon.” “To the moon” is a common phrase.
Non-fungible token. These are digital deeds that certify ownership of a digital asset. Right now, they’re associated with art, but NFTs can certify ownership of anything digital. Read more here.
On-chain refers to something that exists on a blockchain, off-chain refers to something that exists off the blockchain. Cryptocurrency is on-chain money, fiat currency is off-chain money.
The largest NFT marketplace, it specializes in Ethereum-based NFTs. (NFTs built on different blockchains are typically sold on dedicated marketplaces. For instance, Solana NFTs are sold on Solanart.)
Play to Earn (P2E)
Play to Earn (P2E) games are blockchain integrated and reward the player with an in-game cryptocurrency. These in-game cryptocurrencies can be exchanged for bitcoin or ether. The most prominent example is Axie Infinity, where players earn Smooth Love Potion ($SLP).
Proof of Work
Proof of Work (POW) is a consensus mechanism through which blocks are added to a blockchain. Proof of Work requires miners to solve complicated cryptographic puzzles, which demand large amounts of energy from powerful mining rigs, in order to validate new blockchain transactions.
Proof of Work is a safe and decentralized consensus mechanism, but it’s notoriously inefficient. It’s how Bitcoin and Ethereum’s blockchains operate, although Ethereum will soon shift to the more efficient Proof of Stake.
Proof of Stake
Confronted with the huge energy demands of Proof of Work, Proof of Stake (POS) is an updated consensus mechanism that allows blocks to be mined much more efficiently. Proof of Stake allows holders of a cryptocurrency to validate new blocks onto the relevant blockchain.
They do this by staking their cryptocurrency. Users of a network stake their cryptocurrency, and if their stake is chosen by a randomized algorithm, they get the opportunity to validate a new block — for which they’ll get a reward in the form of more cryptocurrency. The more cryptocurrency staked, the higher chance a user is to be chosen to validate a new block.
Where Proof of Work rewards those who have spent the most computational power to solve a cryptographic puzzle, Proof of Stake rewards those who invest their cryptocurrency over a long period of time.
Pump and dump
Pump and dump schemes involve the building up of artificial excitement over a product, which leads people to buy it and raise its price. Pump and dump orchestrators then sell their assets at a high, which then causes the price to fall precipitously.
These exist in traditional markets, but are more common in cryptocurrency trading as the low liquidity of microcap cryptocurrencies makes their prices easier to manipulate.
Rug pulls are when the creator of a cryptocurrency vanishes, taking funds with them. A phony Squid Game coin is a recent example, although these are far from rare. “Rug” is essentially shorthand for “scam.”
The psydonymous creator of Bitcoin. The whitepaper explaining the need for decentralized finance and explaining how Bitcoin works was signed by a Satoshi Nakamoto, but no one knows who the real person is. It’s been speculated that Satoshi Nakamoto is actually several people.
A cryptocurrency that has been rugged.
When you create a cryptocurrency wallet, you’ll be given a 12-word seed phrase. Each time you log into your wallet on a new device, you’ll need to use your seed phrase. Never give your seed phrase to anyone.
Sharding distributes network load across a blockchain, allowing for more transactions to be processed per second. This sounds dry, but it’s extremely important. Ethereum will integrate sharding next year, which will make using it cheaper and much less environmentally damaging.
A shitcoin is an altcoin that provides no utility, either a memecoin or an ineffective altcoin. Read more.
Silk Road was an online black market that was shut down by the FBI in 2013. It’s where many people got their first exposure to cryptocurrency, as bitcoin was a popular payment method for the site’s illegal wares.
A smart contract is a digital contract that executes itself if the required conditions are met. For instance, if Wallet X sends 0.08 ether to Wallet Y, Wallet Y sends NFT Z to Wallet X. They’re most commonly used to automate transactions, but can also be used from more sophisticated purposes such as flash loans.
Stable coins are cryptocurrencies that are pegged to the US dollar. These include Tether and USDC. Their purpose is to allow cryptocurrency traders to keep their tokens in a crypto ecosystem without experiencing the volatility of bitcoin and ether’s price movements.
Certain cryptocurrencies allow you to stake a lump sum of tokens in exchange for receiving a percentage of that lump sum at regular intervals for as long as it’s staked. For instance, Token X may give you a 10% monthly return on any stake above 5,000 tokens. In that case, you’d deposit 5,000 tokens in exchange for recieving 500 of Token X each month. This is a passive income investing strategy: In the above situation, it could take 10 months to recoup the initial 5,000 tokens afterwhich time each monthly payment of 500 Token X would be pure profit (assuming the value of Token X remains steady).
Bitcoin does not offer staking, nor does Ethereum — though ether eventually will when it adopts Proof of Stake.
Short for “think long term.”
This Is Gentleman
The phrase originated from a 2014 Reddit thread on r/bitcoin where the overly excited poster titled the thread “This is gentlemen” instead of “this is it gentlemen.” It’s since been used as a sarcastic remark whenever good Bitcoin news is shared.
Usage of this phrase has died down in recent years, but it’s too funny to not share.
Tokens are blockchain assets that come in many forms. Cryptocurrencies like bitcoin are a type of token. Other types include governance tokens, which grant the holder voting rights in a DAO or service, or utility tokens, where access to a service is granted in accordance with the number of tokens held.
Short for transaction.
A token that aims to provide a function of some kind. These can be access to an application, service or game. Examples include Filecoin, which grant access to blockchain-based digital storage, and Link, which connects smart contracts of off-chain types of data.
A personalized wallet address provided by companies like Ethereum Name Service. It allows you to change your wallet address into a word or phrase of your choice, like CNET.eth.
A product that’s promised but never actually comes to market. The term gained popularity in the late ’90s with the original internet boom and has been revitalized thanks to shady cryptocurrency creators.
The creator behind the Ethereum blockchain.
Cryptocurrency wallets are where you can store your cryptocurrency and NFTs. These wallets can be hot or cold — that is, browser wallets connected to the internet or physical hardware unconnected to the internet. Wallets can both read and write, meaning they can receive information but also act as a signature or online ID.
Web3 is the next iteration of the internet as imagined by blockchain enthusiasts. Web1 was read-only internet, from the internet’s invention until around 2005. Web2 refers to the advent of users being able to produce content and upload it onto the internet. Web3 would be an internet which is blockchain integrated. Imagine owning your social media posts as NFTs, using a cryptocurrency like ether as a universal currency and having your wallet as a form of ID instead of a email/password combo.
Someone with very large holdings of cryptocurrency.
A presale list for cryptocurrencies and NFTs. Whitelisted investors are able to buy the asset before public launch, sometimes for a discounted price.
Short for “we’re all going to make it.”
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January 13, 2022 at 05:36AM